101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
SB1350

 

Introduced 2/13/2019, by Sen. Chuck Weaver

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 5/201  from Ch. 120, par. 2-201

    Amends the Illinois Income Tax Act. Increases the research and development credit by providing that the increase in research and development activities shall be based on an increase over 50% of the average of the qualifying expenditures for each year in the base period (instead of 100% of the average of the qualifying expenditures for each year in the base period). Provides that the research and development credit applies on a permanent basis. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

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1    AN ACT concerning revenue.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Income Tax Act is amended by
5changing Section 201 as follows:
 
6    (35 ILCS 5/201)  (from Ch. 120, par. 2-201)
7    Sec. 201. Tax imposed.
8    (a) In general. A tax measured by net income is hereby
9imposed on every individual, corporation, trust and estate for
10each taxable year ending after July 31, 1969 on the privilege
11of earning or receiving income in or as a resident of this
12State. Such tax shall be in addition to all other occupation or
13privilege taxes imposed by this State or by any municipal
14corporation or political subdivision thereof.
15    (b) Rates. The tax imposed by subsection (a) of this
16Section shall be determined as follows, except as adjusted by
17subsection (d-1):
18        (1) In the case of an individual, trust or estate, for
19    taxable years ending prior to July 1, 1989, an amount equal
20    to 2 1/2% of the taxpayer's net income for the taxable
21    year.
22        (2) In the case of an individual, trust or estate, for
23    taxable years beginning prior to July 1, 1989 and ending

 

 

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1    after June 30, 1989, an amount equal to the sum of (i) 2
2    1/2% of the taxpayer's net income for the period prior to
3    July 1, 1989, as calculated under Section 202.3, and (ii)
4    3% of the taxpayer's net income for the period after June
5    30, 1989, as calculated under Section 202.3.
6        (3) In the case of an individual, trust or estate, for
7    taxable years beginning after June 30, 1989, and ending
8    prior to January 1, 2011, an amount equal to 3% of the
9    taxpayer's net income for the taxable year.
10        (4) In the case of an individual, trust, or estate, for
11    taxable years beginning prior to January 1, 2011, and
12    ending after December 31, 2010, an amount equal to the sum
13    of (i) 3% of the taxpayer's net income for the period prior
14    to January 1, 2011, as calculated under Section 202.5, and
15    (ii) 5% of the taxpayer's net income for the period after
16    December 31, 2010, as calculated under Section 202.5.
17        (5) In the case of an individual, trust, or estate, for
18    taxable years beginning on or after January 1, 2011, and
19    ending prior to January 1, 2015, an amount equal to 5% of
20    the taxpayer's net income for the taxable year.
21        (5.1) In the case of an individual, trust, or estate,
22    for taxable years beginning prior to January 1, 2015, and
23    ending after December 31, 2014, an amount equal to the sum
24    of (i) 5% of the taxpayer's net income for the period prior
25    to January 1, 2015, as calculated under Section 202.5, and
26    (ii) 3.75% of the taxpayer's net income for the period

 

 

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1    after December 31, 2014, as calculated under Section 202.5.
2        (5.2) In the case of an individual, trust, or estate,
3    for taxable years beginning on or after January 1, 2015,
4    and ending prior to July 1, 2017, an amount equal to 3.75%
5    of the taxpayer's net income for the taxable year.
6        (5.3) In the case of an individual, trust, or estate,
7    for taxable years beginning prior to July 1, 2017, and
8    ending after June 30, 2017, an amount equal to the sum of
9    (i) 3.75% of the taxpayer's net income for the period prior
10    to July 1, 2017, as calculated under Section 202.5, and
11    (ii) 4.95% of the taxpayer's net income for the period
12    after June 30, 2017, as calculated under Section 202.5.
13        (5.4) In the case of an individual, trust, or estate,
14    for taxable years beginning on or after July 1, 2017, an
15    amount equal to 4.95% of the taxpayer's net income for the
16    taxable year.
17        (6) In the case of a corporation, for taxable years
18    ending prior to July 1, 1989, an amount equal to 4% of the
19    taxpayer's net income for the taxable year.
20        (7) In the case of a corporation, for taxable years
21    beginning prior to July 1, 1989 and ending after June 30,
22    1989, an amount equal to the sum of (i) 4% of the
23    taxpayer's net income for the period prior to July 1, 1989,
24    as calculated under Section 202.3, and (ii) 4.8% of the
25    taxpayer's net income for the period after June 30, 1989,
26    as calculated under Section 202.3.

 

 

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1        (8) In the case of a corporation, for taxable years
2    beginning after June 30, 1989, and ending prior to January
3    1, 2011, an amount equal to 4.8% of the taxpayer's net
4    income for the taxable year.
5        (9) In the case of a corporation, for taxable years
6    beginning prior to January 1, 2011, and ending after
7    December 31, 2010, an amount equal to the sum of (i) 4.8%
8    of the taxpayer's net income for the period prior to
9    January 1, 2011, as calculated under Section 202.5, and
10    (ii) 7% of the taxpayer's net income for the period after
11    December 31, 2010, as calculated under Section 202.5.
12        (10) In the case of a corporation, for taxable years
13    beginning on or after January 1, 2011, and ending prior to
14    January 1, 2015, an amount equal to 7% of the taxpayer's
15    net income for the taxable year.
16        (11) In the case of a corporation, for taxable years
17    beginning prior to January 1, 2015, and ending after
18    December 31, 2014, an amount equal to the sum of (i) 7% of
19    the taxpayer's net income for the period prior to January
20    1, 2015, as calculated under Section 202.5, and (ii) 5.25%
21    of the taxpayer's net income for the period after December
22    31, 2014, as calculated under Section 202.5.
23        (12) In the case of a corporation, for taxable years
24    beginning on or after January 1, 2015, and ending prior to
25    July 1, 2017, an amount equal to 5.25% of the taxpayer's
26    net income for the taxable year.

 

 

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1        (13) In the case of a corporation, for taxable years
2    beginning prior to July 1, 2017, and ending after June 30,
3    2017, an amount equal to the sum of (i) 5.25% of the
4    taxpayer's net income for the period prior to July 1, 2017,
5    as calculated under Section 202.5, and (ii) 7% of the
6    taxpayer's net income for the period after June 30, 2017,
7    as calculated under Section 202.5.
8        (14) In the case of a corporation, for taxable years
9    beginning on or after July 1, 2017, an amount equal to 7%
10    of the taxpayer's net income for the taxable year.
11    The rates under this subsection (b) are subject to the
12provisions of Section 201.5.
13    (c) Personal Property Tax Replacement Income Tax.
14Beginning on July 1, 1979 and thereafter, in addition to such
15income tax, there is also hereby imposed the Personal Property
16Tax Replacement Income Tax measured by net income on every
17corporation (including Subchapter S corporations), partnership
18and trust, for each taxable year ending after June 30, 1979.
19Such taxes are imposed on the privilege of earning or receiving
20income in or as a resident of this State. The Personal Property
21Tax Replacement Income Tax shall be in addition to the income
22tax imposed by subsections (a) and (b) of this Section and in
23addition to all other occupation or privilege taxes imposed by
24this State or by any municipal corporation or political
25subdivision thereof.
26    (d) Additional Personal Property Tax Replacement Income

 

 

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1Tax Rates. The personal property tax replacement income tax
2imposed by this subsection and subsection (c) of this Section
3in the case of a corporation, other than a Subchapter S
4corporation and except as adjusted by subsection (d-1), shall
5be an additional amount equal to 2.85% of such taxpayer's net
6income for the taxable year, except that beginning on January
71, 1981, and thereafter, the rate of 2.85% specified in this
8subsection shall be reduced to 2.5%, and in the case of a
9partnership, trust or a Subchapter S corporation shall be an
10additional amount equal to 1.5% of such taxpayer's net income
11for the taxable year.
12    (d-1) Rate reduction for certain foreign insurers. In the
13case of a foreign insurer, as defined by Section 35A-5 of the
14Illinois Insurance Code, whose state or country of domicile
15imposes on insurers domiciled in Illinois a retaliatory tax
16(excluding any insurer whose premiums from reinsurance assumed
17are 50% or more of its total insurance premiums as determined
18under paragraph (2) of subsection (b) of Section 304, except
19that for purposes of this determination premiums from
20reinsurance do not include premiums from inter-affiliate
21reinsurance arrangements), beginning with taxable years ending
22on or after December 31, 1999, the sum of the rates of tax
23imposed by subsections (b) and (d) shall be reduced (but not
24increased) to the rate at which the total amount of tax imposed
25under this Act, net of all credits allowed under this Act,
26shall equal (i) the total amount of tax that would be imposed

 

 

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1on the foreign insurer's net income allocable to Illinois for
2the taxable year by such foreign insurer's state or country of
3domicile if that net income were subject to all income taxes
4and taxes measured by net income imposed by such foreign
5insurer's state or country of domicile, net of all credits
6allowed or (ii) a rate of zero if no such tax is imposed on such
7income by the foreign insurer's state of domicile. For the
8purposes of this subsection (d-1), an inter-affiliate includes
9a mutual insurer under common management.
10        (1) For the purposes of subsection (d-1), in no event
11    shall the sum of the rates of tax imposed by subsections
12    (b) and (d) be reduced below the rate at which the sum of:
13            (A) the total amount of tax imposed on such foreign
14        insurer under this Act for a taxable year, net of all
15        credits allowed under this Act, plus
16            (B) the privilege tax imposed by Section 409 of the
17        Illinois Insurance Code, the fire insurance company
18        tax imposed by Section 12 of the Fire Investigation
19        Act, and the fire department taxes imposed under
20        Section 11-10-1 of the Illinois Municipal Code,
21    equals 1.25% for taxable years ending prior to December 31,
22    2003, or 1.75% for taxable years ending on or after
23    December 31, 2003, of the net taxable premiums written for
24    the taxable year, as described by subsection (1) of Section
25    409 of the Illinois Insurance Code. This paragraph will in
26    no event increase the rates imposed under subsections (b)

 

 

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1    and (d).
2        (2) Any reduction in the rates of tax imposed by this
3    subsection shall be applied first against the rates imposed
4    by subsection (b) and only after the tax imposed by
5    subsection (a) net of all credits allowed under this
6    Section other than the credit allowed under subsection (i)
7    has been reduced to zero, against the rates imposed by
8    subsection (d).
9    This subsection (d-1) is exempt from the provisions of
10Section 250.
11    (e) Investment credit. A taxpayer shall be allowed a credit
12against the Personal Property Tax Replacement Income Tax for
13investment in qualified property.
14        (1) A taxpayer shall be allowed a credit equal to .5%
15    of the basis of qualified property placed in service during
16    the taxable year, provided such property is placed in
17    service on or after July 1, 1984. There shall be allowed an
18    additional credit equal to .5% of the basis of qualified
19    property placed in service during the taxable year,
20    provided such property is placed in service on or after
21    July 1, 1986, and the taxpayer's base employment within
22    Illinois has increased by 1% or more over the preceding
23    year as determined by the taxpayer's employment records
24    filed with the Illinois Department of Employment Security.
25    Taxpayers who are new to Illinois shall be deemed to have
26    met the 1% growth in base employment for the first year in

 

 

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1    which they file employment records with the Illinois
2    Department of Employment Security. The provisions added to
3    this Section by Public Act 85-1200 (and restored by Public
4    Act 87-895) shall be construed as declaratory of existing
5    law and not as a new enactment. If, in any year, the
6    increase in base employment within Illinois over the
7    preceding year is less than 1%, the additional credit shall
8    be limited to that percentage times a fraction, the
9    numerator of which is .5% and the denominator of which is
10    1%, but shall not exceed .5%. The investment credit shall
11    not be allowed to the extent that it would reduce a
12    taxpayer's liability in any tax year below zero, nor may
13    any credit for qualified property be allowed for any year
14    other than the year in which the property was placed in
15    service in Illinois. For tax years ending on or after
16    December 31, 1987, and on or before December 31, 1988, the
17    credit shall be allowed for the tax year in which the
18    property is placed in service, or, if the amount of the
19    credit exceeds the tax liability for that year, whether it
20    exceeds the original liability or the liability as later
21    amended, such excess may be carried forward and applied to
22    the tax liability of the 5 taxable years following the
23    excess credit years if the taxpayer (i) makes investments
24    which cause the creation of a minimum of 2,000 full-time
25    equivalent jobs in Illinois, (ii) is located in an
26    enterprise zone established pursuant to the Illinois

 

 

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1    Enterprise Zone Act and (iii) is certified by the
2    Department of Commerce and Community Affairs (now
3    Department of Commerce and Economic Opportunity) as
4    complying with the requirements specified in clause (i) and
5    (ii) by July 1, 1986. The Department of Commerce and
6    Community Affairs (now Department of Commerce and Economic
7    Opportunity) shall notify the Department of Revenue of all
8    such certifications immediately. For tax years ending
9    after December 31, 1988, the credit shall be allowed for
10    the tax year in which the property is placed in service,
11    or, if the amount of the credit exceeds the tax liability
12    for that year, whether it exceeds the original liability or
13    the liability as later amended, such excess may be carried
14    forward and applied to the tax liability of the 5 taxable
15    years following the excess credit years. The credit shall
16    be applied to the earliest year for which there is a
17    liability. If there is credit from more than one tax year
18    that is available to offset a liability, earlier credit
19    shall be applied first.
20        (2) The term "qualified property" means property
21    which:
22            (A) is tangible, whether new or used, including
23        buildings and structural components of buildings and
24        signs that are real property, but not including land or
25        improvements to real property that are not a structural
26        component of a building such as landscaping, sewer

 

 

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1        lines, local access roads, fencing, parking lots, and
2        other appurtenances;
3            (B) is depreciable pursuant to Section 167 of the
4        Internal Revenue Code, except that "3-year property"
5        as defined in Section 168(c)(2)(A) of that Code is not
6        eligible for the credit provided by this subsection
7        (e);
8            (C) is acquired by purchase as defined in Section
9        179(d) of the Internal Revenue Code;
10            (D) is used in Illinois by a taxpayer who is
11        primarily engaged in manufacturing, or in mining coal
12        or fluorite, or in retailing, or was placed in service
13        on or after July 1, 2006 in a River Edge Redevelopment
14        Zone established pursuant to the River Edge
15        Redevelopment Zone Act; and
16            (E) has not previously been used in Illinois in
17        such a manner and by such a person as would qualify for
18        the credit provided by this subsection (e) or
19        subsection (f).
20        (3) For purposes of this subsection (e),
21    "manufacturing" means the material staging and production
22    of tangible personal property by procedures commonly
23    regarded as manufacturing, processing, fabrication, or
24    assembling which changes some existing material into new
25    shapes, new qualities, or new combinations. For purposes of
26    this subsection (e) the term "mining" shall have the same

 

 

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1    meaning as the term "mining" in Section 613(c) of the
2    Internal Revenue Code. For purposes of this subsection (e),
3    the term "retailing" means the sale of tangible personal
4    property for use or consumption and not for resale, or
5    services rendered in conjunction with the sale of tangible
6    personal property for use or consumption and not for
7    resale. For purposes of this subsection (e), "tangible
8    personal property" has the same meaning as when that term
9    is used in the Retailers' Occupation Tax Act, and, for
10    taxable years ending after December 31, 2008, does not
11    include the generation, transmission, or distribution of
12    electricity.
13        (4) The basis of qualified property shall be the basis
14    used to compute the depreciation deduction for federal
15    income tax purposes.
16        (5) If the basis of the property for federal income tax
17    depreciation purposes is increased after it has been placed
18    in service in Illinois by the taxpayer, the amount of such
19    increase shall be deemed property placed in service on the
20    date of such increase in basis.
21        (6) The term "placed in service" shall have the same
22    meaning as under Section 46 of the Internal Revenue Code.
23        (7) If during any taxable year, any property ceases to
24    be qualified property in the hands of the taxpayer within
25    48 months after being placed in service, or the situs of
26    any qualified property is moved outside Illinois within 48

 

 

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1    months after being placed in service, the Personal Property
2    Tax Replacement Income Tax for such taxable year shall be
3    increased. Such increase shall be determined by (i)
4    recomputing the investment credit which would have been
5    allowed for the year in which credit for such property was
6    originally allowed by eliminating such property from such
7    computation and, (ii) subtracting such recomputed credit
8    from the amount of credit previously allowed. For the
9    purposes of this paragraph (7), a reduction of the basis of
10    qualified property resulting from a redetermination of the
11    purchase price shall be deemed a disposition of qualified
12    property to the extent of such reduction.
13        (8) Unless the investment credit is extended by law,
14    the basis of qualified property shall not include costs
15    incurred after December 31, 2018, except for costs incurred
16    pursuant to a binding contract entered into on or before
17    December 31, 2018.
18        (9) Each taxable year ending before December 31, 2000,
19    a partnership may elect to pass through to its partners the
20    credits to which the partnership is entitled under this
21    subsection (e) for the taxable year. A partner may use the
22    credit allocated to him or her under this paragraph only
23    against the tax imposed in subsections (c) and (d) of this
24    Section. If the partnership makes that election, those
25    credits shall be allocated among the partners in the
26    partnership in accordance with the rules set forth in

 

 

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1    Section 704(b) of the Internal Revenue Code, and the rules
2    promulgated under that Section, and the allocated amount of
3    the credits shall be allowed to the partners for that
4    taxable year. The partnership shall make this election on
5    its Personal Property Tax Replacement Income Tax return for
6    that taxable year. The election to pass through the credits
7    shall be irrevocable.
8        For taxable years ending on or after December 31, 2000,
9    a partner that qualifies its partnership for a subtraction
10    under subparagraph (I) of paragraph (2) of subsection (d)
11    of Section 203 or a shareholder that qualifies a Subchapter
12    S corporation for a subtraction under subparagraph (S) of
13    paragraph (2) of subsection (b) of Section 203 shall be
14    allowed a credit under this subsection (e) equal to its
15    share of the credit earned under this subsection (e) during
16    the taxable year by the partnership or Subchapter S
17    corporation, determined in accordance with the
18    determination of income and distributive share of income
19    under Sections 702 and 704 and Subchapter S of the Internal
20    Revenue Code. This paragraph is exempt from the provisions
21    of Section 250.
22    (f) Investment credit; Enterprise Zone; River Edge
23Redevelopment Zone.
24        (1) A taxpayer shall be allowed a credit against the
25    tax imposed by subsections (a) and (b) of this Section for
26    investment in qualified property which is placed in service

 

 

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1    in an Enterprise Zone created pursuant to the Illinois
2    Enterprise Zone Act or, for property placed in service on
3    or after July 1, 2006, a River Edge Redevelopment Zone
4    established pursuant to the River Edge Redevelopment Zone
5    Act. For partners, shareholders of Subchapter S
6    corporations, and owners of limited liability companies,
7    if the liability company is treated as a partnership for
8    purposes of federal and State income taxation, there shall
9    be allowed a credit under this subsection (f) to be
10    determined in accordance with the determination of income
11    and distributive share of income under Sections 702 and 704
12    and Subchapter S of the Internal Revenue Code. The credit
13    shall be .5% of the basis for such property. The credit
14    shall be available only in the taxable year in which the
15    property is placed in service in the Enterprise Zone or
16    River Edge Redevelopment Zone and shall not be allowed to
17    the extent that it would reduce a taxpayer's liability for
18    the tax imposed by subsections (a) and (b) of this Section
19    to below zero. For tax years ending on or after December
20    31, 1985, the credit shall be allowed for the tax year in
21    which the property is placed in service, or, if the amount
22    of the credit exceeds the tax liability for that year,
23    whether it exceeds the original liability or the liability
24    as later amended, such excess may be carried forward and
25    applied to the tax liability of the 5 taxable years
26    following the excess credit year. The credit shall be

 

 

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1    applied to the earliest year for which there is a
2    liability. If there is credit from more than one tax year
3    that is available to offset a liability, the credit
4    accruing first in time shall be applied first.
5        (2) The term qualified property means property which:
6            (A) is tangible, whether new or used, including
7        buildings and structural components of buildings;
8            (B) is depreciable pursuant to Section 167 of the
9        Internal Revenue Code, except that "3-year property"
10        as defined in Section 168(c)(2)(A) of that Code is not
11        eligible for the credit provided by this subsection
12        (f);
13            (C) is acquired by purchase as defined in Section
14        179(d) of the Internal Revenue Code;
15            (D) is used in the Enterprise Zone or River Edge
16        Redevelopment Zone by the taxpayer; and
17            (E) has not been previously used in Illinois in
18        such a manner and by such a person as would qualify for
19        the credit provided by this subsection (f) or
20        subsection (e).
21        (3) The basis of qualified property shall be the basis
22    used to compute the depreciation deduction for federal
23    income tax purposes.
24        (4) If the basis of the property for federal income tax
25    depreciation purposes is increased after it has been placed
26    in service in the Enterprise Zone or River Edge

 

 

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1    Redevelopment Zone by the taxpayer, the amount of such
2    increase shall be deemed property placed in service on the
3    date of such increase in basis.
4        (5) The term "placed in service" shall have the same
5    meaning as under Section 46 of the Internal Revenue Code.
6        (6) If during any taxable year, any property ceases to
7    be qualified property in the hands of the taxpayer within
8    48 months after being placed in service, or the situs of
9    any qualified property is moved outside the Enterprise Zone
10    or River Edge Redevelopment Zone within 48 months after
11    being placed in service, the tax imposed under subsections
12    (a) and (b) of this Section for such taxable year shall be
13    increased. Such increase shall be determined by (i)
14    recomputing the investment credit which would have been
15    allowed for the year in which credit for such property was
16    originally allowed by eliminating such property from such
17    computation, and (ii) subtracting such recomputed credit
18    from the amount of credit previously allowed. For the
19    purposes of this paragraph (6), a reduction of the basis of
20    qualified property resulting from a redetermination of the
21    purchase price shall be deemed a disposition of qualified
22    property to the extent of such reduction.
23        (7) There shall be allowed an additional credit equal
24    to 0.5% of the basis of qualified property placed in
25    service during the taxable year in a River Edge
26    Redevelopment Zone, provided such property is placed in

 

 

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1    service on or after July 1, 2006, and the taxpayer's base
2    employment within Illinois has increased by 1% or more over
3    the preceding year as determined by the taxpayer's
4    employment records filed with the Illinois Department of
5    Employment Security. Taxpayers who are new to Illinois
6    shall be deemed to have met the 1% growth in base
7    employment for the first year in which they file employment
8    records with the Illinois Department of Employment
9    Security. If, in any year, the increase in base employment
10    within Illinois over the preceding year is less than 1%,
11    the additional credit shall be limited to that percentage
12    times a fraction, the numerator of which is 0.5% and the
13    denominator of which is 1%, but shall not exceed 0.5%.
14    (g) (Blank).
15    (h) Investment credit; High Impact Business.
16        (1) Subject to subsections (b) and (b-5) of Section 5.5
17    of the Illinois Enterprise Zone Act, a taxpayer shall be
18    allowed a credit against the tax imposed by subsections (a)
19    and (b) of this Section for investment in qualified
20    property which is placed in service by a Department of
21    Commerce and Economic Opportunity designated High Impact
22    Business. The credit shall be .5% of the basis for such
23    property. The credit shall not be available (i) until the
24    minimum investments in qualified property set forth in
25    subdivision (a)(3)(A) of Section 5.5 of the Illinois
26    Enterprise Zone Act have been satisfied or (ii) until the

 

 

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1    time authorized in subsection (b-5) of the Illinois
2    Enterprise Zone Act for entities designated as High Impact
3    Businesses under subdivisions (a)(3)(B), (a)(3)(C), and
4    (a)(3)(D) of Section 5.5 of the Illinois Enterprise Zone
5    Act, and shall not be allowed to the extent that it would
6    reduce a taxpayer's liability for the tax imposed by
7    subsections (a) and (b) of this Section to below zero. The
8    credit applicable to such investments shall be taken in the
9    taxable year in which such investments have been completed.
10    The credit for additional investments beyond the minimum
11    investment by a designated high impact business authorized
12    under subdivision (a)(3)(A) of Section 5.5 of the Illinois
13    Enterprise Zone Act shall be available only in the taxable
14    year in which the property is placed in service and shall
15    not be allowed to the extent that it would reduce a
16    taxpayer's liability for the tax imposed by subsections (a)
17    and (b) of this Section to below zero. For tax years ending
18    on or after December 31, 1987, the credit shall be allowed
19    for the tax year in which the property is placed in
20    service, or, if the amount of the credit exceeds the tax
21    liability for that year, whether it exceeds the original
22    liability or the liability as later amended, such excess
23    may be carried forward and applied to the tax liability of
24    the 5 taxable years following the excess credit year. The
25    credit shall be applied to the earliest year for which
26    there is a liability. If there is credit from more than one

 

 

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1    tax year that is available to offset a liability, the
2    credit accruing first in time shall be applied first.
3        Changes made in this subdivision (h)(1) by Public Act
4    88-670 restore changes made by Public Act 85-1182 and
5    reflect existing law.
6        (2) The term qualified property means property which:
7            (A) is tangible, whether new or used, including
8        buildings and structural components of buildings;
9            (B) is depreciable pursuant to Section 167 of the
10        Internal Revenue Code, except that "3-year property"
11        as defined in Section 168(c)(2)(A) of that Code is not
12        eligible for the credit provided by this subsection
13        (h);
14            (C) is acquired by purchase as defined in Section
15        179(d) of the Internal Revenue Code; and
16            (D) is not eligible for the Enterprise Zone
17        Investment Credit provided by subsection (f) of this
18        Section.
19        (3) The basis of qualified property shall be the basis
20    used to compute the depreciation deduction for federal
21    income tax purposes.
22        (4) If the basis of the property for federal income tax
23    depreciation purposes is increased after it has been placed
24    in service in a federally designated Foreign Trade Zone or
25    Sub-Zone located in Illinois by the taxpayer, the amount of
26    such increase shall be deemed property placed in service on

 

 

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1    the date of such increase in basis.
2        (5) The term "placed in service" shall have the same
3    meaning as under Section 46 of the Internal Revenue Code.
4        (6) If during any taxable year ending on or before
5    December 31, 1996, any property ceases to be qualified
6    property in the hands of the taxpayer within 48 months
7    after being placed in service, or the situs of any
8    qualified property is moved outside Illinois within 48
9    months after being placed in service, the tax imposed under
10    subsections (a) and (b) of this Section for such taxable
11    year shall be increased. Such increase shall be determined
12    by (i) recomputing the investment credit which would have
13    been allowed for the year in which credit for such property
14    was originally allowed by eliminating such property from
15    such computation, and (ii) subtracting such recomputed
16    credit from the amount of credit previously allowed. For
17    the purposes of this paragraph (6), a reduction of the
18    basis of qualified property resulting from a
19    redetermination of the purchase price shall be deemed a
20    disposition of qualified property to the extent of such
21    reduction.
22        (7) Beginning with tax years ending after December 31,
23    1996, if a taxpayer qualifies for the credit under this
24    subsection (h) and thereby is granted a tax abatement and
25    the taxpayer relocates its entire facility in violation of
26    the explicit terms and length of the contract under Section

 

 

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1    18-183 of the Property Tax Code, the tax imposed under
2    subsections (a) and (b) of this Section shall be increased
3    for the taxable year in which the taxpayer relocated its
4    facility by an amount equal to the amount of credit
5    received by the taxpayer under this subsection (h).
6    (i) Credit for Personal Property Tax Replacement Income
7Tax. For tax years ending prior to December 31, 2003, a credit
8shall be allowed against the tax imposed by subsections (a) and
9(b) of this Section for the tax imposed by subsections (c) and
10(d) of this Section. This credit shall be computed by
11multiplying the tax imposed by subsections (c) and (d) of this
12Section by a fraction, the numerator of which is base income
13allocable to Illinois and the denominator of which is Illinois
14base income, and further multiplying the product by the tax
15rate imposed by subsections (a) and (b) of this Section.
16    Any credit earned on or after December 31, 1986 under this
17subsection which is unused in the year the credit is computed
18because it exceeds the tax liability imposed by subsections (a)
19and (b) for that year (whether it exceeds the original
20liability or the liability as later amended) may be carried
21forward and applied to the tax liability imposed by subsections
22(a) and (b) of the 5 taxable years following the excess credit
23year, provided that no credit may be carried forward to any
24year ending on or after December 31, 2003. This credit shall be
25applied first to the earliest year for which there is a
26liability. If there is a credit under this subsection from more

 

 

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1than one tax year that is available to offset a liability the
2earliest credit arising under this subsection shall be applied
3first.
4    If, during any taxable year ending on or after December 31,
51986, the tax imposed by subsections (c) and (d) of this
6Section for which a taxpayer has claimed a credit under this
7subsection (i) is reduced, the amount of credit for such tax
8shall also be reduced. Such reduction shall be determined by
9recomputing the credit to take into account the reduced tax
10imposed by subsections (c) and (d). If any portion of the
11reduced amount of credit has been carried to a different
12taxable year, an amended return shall be filed for such taxable
13year to reduce the amount of credit claimed.
14    (j) Training expense credit. Beginning with tax years
15ending on or after December 31, 1986 and prior to December 31,
162003, a taxpayer shall be allowed a credit against the tax
17imposed by subsections (a) and (b) under this Section for all
18amounts paid or accrued, on behalf of all persons employed by
19the taxpayer in Illinois or Illinois residents employed outside
20of Illinois by a taxpayer, for educational or vocational
21training in semi-technical or technical fields or semi-skilled
22or skilled fields, which were deducted from gross income in the
23computation of taxable income. The credit against the tax
24imposed by subsections (a) and (b) shall be 1.6% of such
25training expenses. For partners, shareholders of subchapter S
26corporations, and owners of limited liability companies, if the

 

 

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1liability company is treated as a partnership for purposes of
2federal and State income taxation, there shall be allowed a
3credit under this subsection (j) to be determined in accordance
4with the determination of income and distributive share of
5income under Sections 702 and 704 and subchapter S of the
6Internal Revenue Code.
7    Any credit allowed under this subsection which is unused in
8the year the credit is earned may be carried forward to each of
9the 5 taxable years following the year for which the credit is
10first computed until it is used. This credit shall be applied
11first to the earliest year for which there is a liability. If
12there is a credit under this subsection from more than one tax
13year that is available to offset a liability the earliest
14credit arising under this subsection shall be applied first. No
15carryforward credit may be claimed in any tax year ending on or
16after December 31, 2003.
17    (k) Research and development credit. For tax years ending
18after July 1, 1990 and prior to December 31, 2003, and
19beginning again for tax years ending on or after December 31,
202004, and ending prior to January 1, 2022, a taxpayer shall be
21allowed a credit against the tax imposed by subsections (a) and
22(b) of this Section for increasing research activities in this
23State. The credit allowed against the tax imposed by
24subsections (a) and (b) shall be equal to 6 1/2% of the
25qualifying expenditures for increasing research activities in
26this State. For partners, shareholders of subchapter S

 

 

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1corporations, and owners of limited liability companies, if the
2liability company is treated as a partnership for purposes of
3federal and State income taxation, there shall be allowed a
4credit under this subsection to be determined in accordance
5with the determination of income and distributive share of
6income under Sections 702 and 704 and subchapter S of the
7Internal Revenue Code.
8    For purposes of this subsection the following terms have
9the following meanings. "Qualifying , "qualifying
10expenditures" means the qualifying expenditures as defined for
11the federal credit for increasing research activities which
12would be allowable under Section 41 of the Internal Revenue
13Code and which are conducted in this State. "Qualifying ,
14"qualifying expenditures for increasing research activities in
15this State" means the excess of qualifying expenditures for the
16taxable year in which incurred over qualifying expenditures for
17the base period. "Qualifying , "qualifying expenditures for the
18base period" means: (1) for taxable years ending prior to
19December 31, 2019, the average of the qualifying expenditures
20for each year in the base period; and (2) for taxable years
21ending on or after December 31, 2019, 50% of the average of the
22qualifying expenditures for each year in the base period.
23"Base , and "base period" means the 3 taxable years immediately
24preceding the taxable year for which the determination is being
25made.
26    Any credit in excess of the tax liability for the taxable

 

 

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1year may be carried forward. A taxpayer may elect to have the
2unused credit shown on its final completed return carried over
3as a credit against the tax liability for the following 5
4taxable years or until it has been fully used, whichever occurs
5first; provided that no credit earned in a tax year ending
6prior to December 31, 2003 may be carried forward to any year
7ending on or after December 31, 2003.
8    If an unused credit is carried forward to a given year from
92 or more earlier years, that credit arising in the earliest
10year will be applied first against the tax liability for the
11given year. If a tax liability for the given year still
12remains, the credit from the next earliest year will then be
13applied, and so on, until all credits have been used or no tax
14liability for the given year remains. Any remaining unused
15credit or credits then will be carried forward to the next
16following year in which a tax liability is incurred, except
17that no credit can be carried forward to a year which is more
18than 5 years after the year in which the expense for which the
19credit is given was incurred.
20    No inference shall be drawn from this amendatory Act of the
2191st General Assembly in construing this Section for taxable
22years beginning before January 1, 1999.
23    It is the intent of the General Assembly that the research
24and development credit under this subsection (k) shall apply
25continuously for all tax years ending on or after December 31,
262004 and ending prior to January 1, 2022, including, but not

 

 

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1limited to, the period beginning on January 1, 2016 and ending
2on the effective date of this amendatory Act of the 100th
3General Assembly. All actions taken in reliance on the
4continuation of the credit under this subsection (k) by any
5taxpayer are hereby validated.
6    This subsection (k) is exempt from the provisions of
7Section 250.
8    (l) Environmental Remediation Tax Credit.
9        (i) For tax years ending after December 31, 1997 and on
10    or before December 31, 2001, a taxpayer shall be allowed a
11    credit against the tax imposed by subsections (a) and (b)
12    of this Section for certain amounts paid for unreimbursed
13    eligible remediation costs, as specified in this
14    subsection. For purposes of this Section, "unreimbursed
15    eligible remediation costs" means costs approved by the
16    Illinois Environmental Protection Agency ("Agency") under
17    Section 58.14 of the Environmental Protection Act that were
18    paid in performing environmental remediation at a site for
19    which a No Further Remediation Letter was issued by the
20    Agency and recorded under Section 58.10 of the
21    Environmental Protection Act. The credit must be claimed
22    for the taxable year in which Agency approval of the
23    eligible remediation costs is granted. The credit is not
24    available to any taxpayer if the taxpayer or any related
25    party caused or contributed to, in any material respect, a
26    release of regulated substances on, in, or under the site

 

 

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1    that was identified and addressed by the remedial action
2    pursuant to the Site Remediation Program of the
3    Environmental Protection Act. After the Pollution Control
4    Board rules are adopted pursuant to the Illinois
5    Administrative Procedure Act for the administration and
6    enforcement of Section 58.9 of the Environmental
7    Protection Act, determinations as to credit availability
8    for purposes of this Section shall be made consistent with
9    those rules. For purposes of this Section, "taxpayer"
10    includes a person whose tax attributes the taxpayer has
11    succeeded to under Section 381 of the Internal Revenue Code
12    and "related party" includes the persons disallowed a
13    deduction for losses by paragraphs (b), (c), and (f)(1) of
14    Section 267 of the Internal Revenue Code by virtue of being
15    a related taxpayer, as well as any of its partners. The
16    credit allowed against the tax imposed by subsections (a)
17    and (b) shall be equal to 25% of the unreimbursed eligible
18    remediation costs in excess of $100,000 per site, except
19    that the $100,000 threshold shall not apply to any site
20    contained in an enterprise zone as determined by the
21    Department of Commerce and Community Affairs (now
22    Department of Commerce and Economic Opportunity). The
23    total credit allowed shall not exceed $40,000 per year with
24    a maximum total of $150,000 per site. For partners and
25    shareholders of subchapter S corporations, there shall be
26    allowed a credit under this subsection to be determined in

 

 

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1    accordance with the determination of income and
2    distributive share of income under Sections 702 and 704 and
3    subchapter S of the Internal Revenue Code.
4        (ii) A credit allowed under this subsection that is
5    unused in the year the credit is earned may be carried
6    forward to each of the 5 taxable years following the year
7    for which the credit is first earned until it is used. The
8    term "unused credit" does not include any amounts of
9    unreimbursed eligible remediation costs in excess of the
10    maximum credit per site authorized under paragraph (i).
11    This credit shall be applied first to the earliest year for
12    which there is a liability. If there is a credit under this
13    subsection from more than one tax year that is available to
14    offset a liability, the earliest credit arising under this
15    subsection shall be applied first. A credit allowed under
16    this subsection may be sold to a buyer as part of a sale of
17    all or part of the remediation site for which the credit
18    was granted. The purchaser of a remediation site and the
19    tax credit shall succeed to the unused credit and remaining
20    carry-forward period of the seller. To perfect the
21    transfer, the assignor shall record the transfer in the
22    chain of title for the site and provide written notice to
23    the Director of the Illinois Department of Revenue of the
24    assignor's intent to sell the remediation site and the
25    amount of the tax credit to be transferred as a portion of
26    the sale. In no event may a credit be transferred to any

 

 

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1    taxpayer if the taxpayer or a related party would not be
2    eligible under the provisions of subsection (i).
3        (iii) For purposes of this Section, the term "site"
4    shall have the same meaning as under Section 58.2 of the
5    Environmental Protection Act.
6    (m) Education expense credit. Beginning with tax years
7ending after December 31, 1999, a taxpayer who is the custodian
8of one or more qualifying pupils shall be allowed a credit
9against the tax imposed by subsections (a) and (b) of this
10Section for qualified education expenses incurred on behalf of
11the qualifying pupils. The credit shall be equal to 25% of
12qualified education expenses, but in no event may the total
13credit under this subsection claimed by a family that is the
14custodian of qualifying pupils exceed (i) $500 for tax years
15ending prior to December 31, 2017, and (ii) $750 for tax years
16ending on or after December 31, 2017. In no event shall a
17credit under this subsection reduce the taxpayer's liability
18under this Act to less than zero. Notwithstanding any other
19provision of law, for taxable years beginning on or after
20January 1, 2017, no taxpayer may claim a credit under this
21subsection (m) if the taxpayer's adjusted gross income for the
22taxable year exceeds (i) $500,000, in the case of spouses
23filing a joint federal tax return or (ii) $250,000, in the case
24of all other taxpayers. This subsection is exempt from the
25provisions of Section 250 of this Act.
26    For purposes of this subsection:

 

 

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1    "Qualifying pupils" means individuals who (i) are
2residents of the State of Illinois, (ii) are under the age of
321 at the close of the school year for which a credit is
4sought, and (iii) during the school year for which a credit is
5sought were full-time pupils enrolled in a kindergarten through
6twelfth grade education program at any school, as defined in
7this subsection.
8    "Qualified education expense" means the amount incurred on
9behalf of a qualifying pupil in excess of $250 for tuition,
10book fees, and lab fees at the school in which the pupil is
11enrolled during the regular school year.
12    "School" means any public or nonpublic elementary or
13secondary school in Illinois that is in compliance with Title
14VI of the Civil Rights Act of 1964 and attendance at which
15satisfies the requirements of Section 26-1 of the School Code,
16except that nothing shall be construed to require a child to
17attend any particular public or nonpublic school to qualify for
18the credit under this Section.
19    "Custodian" means, with respect to qualifying pupils, an
20Illinois resident who is a parent, the parents, a legal
21guardian, or the legal guardians of the qualifying pupils.
22    (n) River Edge Redevelopment Zone site remediation tax
23credit.
24        (i) For tax years ending on or after December 31, 2006,
25    a taxpayer shall be allowed a credit against the tax
26    imposed by subsections (a) and (b) of this Section for

 

 

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1    certain amounts paid for unreimbursed eligible remediation
2    costs, as specified in this subsection. For purposes of
3    this Section, "unreimbursed eligible remediation costs"
4    means costs approved by the Illinois Environmental
5    Protection Agency ("Agency") under Section 58.14a of the
6    Environmental Protection Act that were paid in performing
7    environmental remediation at a site within a River Edge
8    Redevelopment Zone for which a No Further Remediation
9    Letter was issued by the Agency and recorded under Section
10    58.10 of the Environmental Protection Act. The credit must
11    be claimed for the taxable year in which Agency approval of
12    the eligible remediation costs is granted. The credit is
13    not available to any taxpayer if the taxpayer or any
14    related party caused or contributed to, in any material
15    respect, a release of regulated substances on, in, or under
16    the site that was identified and addressed by the remedial
17    action pursuant to the Site Remediation Program of the
18    Environmental Protection Act. Determinations as to credit
19    availability for purposes of this Section shall be made
20    consistent with rules adopted by the Pollution Control
21    Board pursuant to the Illinois Administrative Procedure
22    Act for the administration and enforcement of Section 58.9
23    of the Environmental Protection Act. For purposes of this
24    Section, "taxpayer" includes a person whose tax attributes
25    the taxpayer has succeeded to under Section 381 of the
26    Internal Revenue Code and "related party" includes the

 

 

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1    persons disallowed a deduction for losses by paragraphs
2    (b), (c), and (f)(1) of Section 267 of the Internal Revenue
3    Code by virtue of being a related taxpayer, as well as any
4    of its partners. The credit allowed against the tax imposed
5    by subsections (a) and (b) shall be equal to 25% of the
6    unreimbursed eligible remediation costs in excess of
7    $100,000 per site.
8        (ii) A credit allowed under this subsection that is
9    unused in the year the credit is earned may be carried
10    forward to each of the 5 taxable years following the year
11    for which the credit is first earned until it is used. This
12    credit shall be applied first to the earliest year for
13    which there is a liability. If there is a credit under this
14    subsection from more than one tax year that is available to
15    offset a liability, the earliest credit arising under this
16    subsection shall be applied first. A credit allowed under
17    this subsection may be sold to a buyer as part of a sale of
18    all or part of the remediation site for which the credit
19    was granted. The purchaser of a remediation site and the
20    tax credit shall succeed to the unused credit and remaining
21    carry-forward period of the seller. To perfect the
22    transfer, the assignor shall record the transfer in the
23    chain of title for the site and provide written notice to
24    the Director of the Illinois Department of Revenue of the
25    assignor's intent to sell the remediation site and the
26    amount of the tax credit to be transferred as a portion of

 

 

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1    the sale. In no event may a credit be transferred to any
2    taxpayer if the taxpayer or a related party would not be
3    eligible under the provisions of subsection (i).
4        (iii) For purposes of this Section, the term "site"
5    shall have the same meaning as under Section 58.2 of the
6    Environmental Protection Act.
7    (o) For each of taxable years during the Compassionate Use
8of Medical Cannabis Pilot Program, a surcharge is imposed on
9all taxpayers on income arising from the sale or exchange of
10capital assets, depreciable business property, real property
11used in the trade or business, and Section 197 intangibles of
12an organization registrant under the Compassionate Use of
13Medical Cannabis Pilot Program Act. The amount of the surcharge
14is equal to the amount of federal income tax liability for the
15taxable year attributable to those sales and exchanges. The
16surcharge imposed does not apply if:
17        (1) the medical cannabis cultivation center
18    registration, medical cannabis dispensary registration, or
19    the property of a registration is transferred as a result
20    of any of the following:
21            (A) bankruptcy, a receivership, or a debt
22        adjustment initiated by or against the initial
23        registration or the substantial owners of the initial
24        registration;
25            (B) cancellation, revocation, or termination of
26        any registration by the Illinois Department of Public

 

 

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1        Health;
2            (C) a determination by the Illinois Department of
3        Public Health that transfer of the registration is in
4        the best interests of Illinois qualifying patients as
5        defined by the Compassionate Use of Medical Cannabis
6        Pilot Program Act;
7            (D) the death of an owner of the equity interest in
8        a registrant;
9            (E) the acquisition of a controlling interest in
10        the stock or substantially all of the assets of a
11        publicly traded company;
12            (F) a transfer by a parent company to a wholly
13        owned subsidiary; or
14            (G) the transfer or sale to or by one person to
15        another person where both persons were initial owners
16        of the registration when the registration was issued;
17        or
18        (2) the cannabis cultivation center registration,
19    medical cannabis dispensary registration, or the
20    controlling interest in a registrant's property is
21    transferred in a transaction to lineal descendants in which
22    no gain or loss is recognized or as a result of a
23    transaction in accordance with Section 351 of the Internal
24    Revenue Code in which no gain or loss is recognized.
25(Source: P.A. 100-22, eff. 7-6-17.)
 
26    Section 99. Effective date. This Act takes effect upon

 

 

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1becoming law.